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Why should I partner with an accelerator?

Top Benefits to Consider When Weighing the Different Models of ETA

The accelerator model was created to improve upon some of the challenges associated with a traditional and self-funded search.  Here are 10 benefits to the accelerator model.

1. Infrastructure – When you launch a search, you need to stand up a website, a CRM, a back office, an office space, and more. You need to get set up with data vendors. You need to stand up an internship program. Accelerators have all of the infrastructure already established. This enables searchers to spend a greater share of their time focusing on the search, and less of the time on administrative duties.
2. Playbooks & Learning from Prior Searchers – Accelerators are constantly documenting best practices, Talent development and mentorship are at the core of the model. This enables searchers to get up the curve a lot faster, and not make the same mistakes as prior searchers.
3. Mentorship – Accelerators have a long list of advisors, principals and prior searchers who take pride in mentoring/guiding/advising.  Their job is to open doors for you, assist you in management meetings, help you structure the deal, etc.
4. Committed Capital – Unlike the traditional model, accelerators have committed capital. When you find a deal, instead of having to pass the hat around to a long list of investors, accelerators can move quickly.  The money has already been raised.
5. Deal Team – The only thing worse than not doing a deal is doing a bad deal. Accelerators have a set of investment professionals to guide you through the entire process and ensure the business is well-diligenced.
6. Operations Team – Once you take the CEO seat, accelerators will continue guiding and mentoring you. In the same way that an accelerator captures best practices throughout the search phase, they do the same after a business is bought. Those learnings are shared with first time CEOs.
7. Economics – At NGP, not only are the economics are identical to the traditional model, searchers also have the ability to do bigger deals and bolt-on acquisitions.  This increases the odds of a more meaningful economic outcome for searchers.
8. Access to Service Providers – When going through the due diligence and transaction processes, you will need to hire a service provider to do a quality of earnings report, IT diligence provider, lawyers, insurance providers, to name a few.  You will also need to source debt financing.  Accelerators have strong relationships with the entire eco-system of service providers, and tend to get preferential pricing.
9. Community – Searching can be lonely. When you search at an accelerator, there are usually 5-6 other searchers who come to the same office as you, and are a constant source of support. Strong bonds/friendships are created as a result.
10. Boomerangs – When you partner with an accelerator, they have a CRM with tens of thousands of leads in hundreds of industries. It is common for business owners who were previously unready to sell calling back, years later.  Searchers on an Accelerator platform get access to those inbound inquiries.

All that said, the accelerator model isn’t for everyone. If a searcher has tight geographic constraints, would like to purchase a really small business (Sub $2M EBITDA), is agnostic to valuations, would like to purchase a business that tends to be outside the search fund target   (e.g. asset heavy, cyclical, heavy customer concentration, turn arounds, etc.), then it likely won’t be the right fit. From a culture perspective, searchers on an accelerator platform are generally asked to devote some time to sharing best practices with incoming searchers, providing interns with a positive, hands-on experience, helping the accelerator with hiring decisions, and several other Business Development initiatives. That won’t appeal to everyone.

While some worry about their degree of autonomy they may have on an accelerator platform, in reality, it isn’t all that different from the traditional model. In the end, when searchers take money from investors, they need to be aligned on risk/reward, and valuations. If there is alignment on Day 1, the autonomy issue fades because both parties are aligned on industry and what constitutes good risk/reward.